Abstract
The aggregate production function used in Solow’s growth models assumes the constancy in relative income distribution between owners of capital and labor input. The paper discusses the validity of this fundamental assumption and attempts to identify the necessary condition for the balanced and equi-proportional growth of relative incomes from the perspective of the Marxian circuit of capital model. The analysis in this paper shows that the constancy and proportionality in the growth of two social class incomes are not consistent with real-world patterns of the capital accumulation process, in which the decision over capitalization of realized surplus value that determines the capital income is independently made from the decision over the change in the technical composition of the productive capital stock, which determines the total labor income. Though it is logically possible to identify the necessary condition for the balanced and equi-proportional growth of the two social-class incomes along the accumulation of the capital stock, it is hardly sensible to assume that the capitalist economic system automatically attains this harmonious distributive outcome in the absence of the external correction mechanism.
Original language | American English |
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State | Published - 2023 |
Keywords
- The Solow model
- Aggregate production function
- income distribution
- Marxian circuit of capital
- Simulation
Disciplines
- Economics